10 Most Common Payroll Pitfalls

Tracie M. Sawade, CPPTechnical ConsultantUltimate Software

Biography

Certified Payroll Professional since 1996

Former Member of APA’s National Speakers Bureau and Current Member Hotline Referral Committee

Former President of the Denver Chapter Payroll Association

Presented at APA’s Congress and Chapter Leadership Seminars, Rocky Mountain Regional and Texas Payroll Conference, Indiana Statewide and Chicago, Denver and Minneapolis Chapters

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Agenda

Mistakes Happen

Common Blunders

Minimizing Them

Let’s get started…

Voids and Reversals

Voids

Impact• Quarter/year end• GL and bank accounts

Reversals and adjustments

Voids/Reversals Recommendations

Process voids promptly

Track and compare

Supplemental payrolls• Posting transactions

Validate NO NEGATIVE WAGES

Deductions and Earnings

Incorrect taxation

Impacts• Employee/Organization

Deductions

Earnings• Taxable Fringe Benefits

Taxable Fringe Benefits

What is a taxable fringe benefit?• Examples

Imputed earnings• Group Term Life

Costs

Deductions and Earnings - The Fix

Research proper taxation• FIT/SIT/FUTA• www.IRS.org• W-2 vs. 1099• What box?

oW-2 Instructions

• Publications 15 and 15-B

The Fix Continued

Verify set up on system

Test, test, test

Process promptly

Save Your Company Money by Doing it Right the First Time

State/Local Taxes

Employees who move• Did they forget to tell you?

Reciprocal agreements

Correct reporting

Costs• Audits and amendments

State Taxes – What to do

Verify correct set up• APA’s Guide to State Payrolls• BNA, CCH, State sites

Employees who move• Timing/Checklist• Quarterly reminders

Validating with reports• SUI

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Wage and Tax Details

Year-end Preparation

Waiting too long

No checklist

Compliance

Lack of testing

Not enough time for critical tasks

Year-end - The Master Plan

Start early• Have you started yet?

Create a plan/checklist

Create a team

Where you can find help• APA’s Year-end course• Vendors/local chapters

Year-end Reconciliation

Waiting compounds issues

W-2 totals <> 941 totals

Too much going on in Q4

Reconciliation – The Key

Create spreadsheet• Taxable wages• Taxes that can be manually calculated

Collect data each payroll/month

Early detection

Pay attention to warning signs

Compliance – It Matters!

Challenges• Healthcare Reform• Hard to interpret

Potential costs• Audits• Fines and penalties

Recommendations

Intercompany Transfers

Multiple companies

Acquisitions/Successor

When do taxes start over?

Tracking/verifying YTD

Costs• W-2cs, amendments• Audits, penalties

Things to Remember

Understand wages and taxes• SS/SUI/FUTA – start over

Tax details

Deductions - YTD

System Improvements

ESS/MSS

Workflow – what is it?

Change management

Dos and don’ts

Potential savings

Steps to Take

Recommendations• What do you do today?• Does it make sense?• Process maps

Successful Implementation

Key to Success • Have a plan• Communication

Change management/training• Manager/employee training• Gaining user acceptance

GL Reporting

Challenges• New earnings, deductions and taxes• Structural changes• Acquisitions

Costs• Time, corrections, labor allocations

Recommendations…

Regular Rate and Overtime

Common misconceptions

Does it really make a difference?

Have to pay OT on extra earnings

For some companies makes no difference• But for others it does!

Regular Rate and FLSA OT

Regular Rate of Pay

Based on what?

All earnings to be included• Regular, regular overtime, commission, non-discretionary bonuses, premiums

Add all earnings and divide by total hours

Overtime Example

Reg. Rate = $10/hour/OT Rate = $15

Hours = 40 regular, 10 overtime

Other earnings = $500

40 * 10 = $400 + 10 * 15 = $150 + $500 = $1050

Right?

FLSA OT – The Right Way

Rate = $10, 40 regular, 10 overtime, $500 other earnings

50 * 10 = $500 + $500 = $1000

$1000/50 hours = $20/hour (reg. rate) * .5 = $10/hour (OT rate); $10 * 10 = $100

$500 + $500 + $100 = $1100

Wrapping It Up

Rolling the dice

Pay Now or Pay Later

Questions?

For More Information

American Payroll Association (Links > State)

http:// www.americanpayroll.org

US Department of Labor http://www.dol.gov

Internal Revenue Service http://www.irs.gov

Social Security Administration http://www.ssa.org